“With Tesla pushing forward with the house battery, and crowd funded solar, we may start to see the rise of local home power generation and storage networks,” Mr. Owyang told me in an interview after his keynote address.

CONVENTIONAL BUSINESS models must change to stay current, he says. In the sharing economy, products become services (Netflix), services become marketplaces (Airbnb), marketplaces become platforms (Kickstarter). A century ago, utilities’ generation and distribution platforms became the product, and little has really changed since.

Jeremiah Owyang of Crowd Companies warned utilities about the disruption of a sharing economy

Another old-line industry, banks, had only each other to worry about before Funding Circle, bitcoin and LendingClub came along. At least banks had competition in the market.

In Europe, where energy policy is a decade ahead of the United States, a Netherlands company named Vandebron is using a Spotify-like subscription model to share clean energy among its members. “That’s all I know about them,” quips Mr. Owyang, “because their web site is all in Dutch.” But a 2014 interview with Vandebron’s founder, in English, says enough:

“It all started with a question,” said Aart Van Veller. “Before Vandebron, independent producers of renewable energy had to sell their energy to an energy company, which in turn would sell it to consumers with a profit. We wondered if we could make such companies obsolete.”

If utilities find the idea threatening, consumers may find it daunting. Early adopters would be the first to try shopping around for electricity from their neighbors. Most homeowners wouldn’t bother with such drastic change until the process became frictionless, like paying the energy bill is today.

Honeycomb diagram of the industry sectors that have experienced disruption by crowdsourcing (Crowd Companies graphic, click for larger version)

“Not all consumers are actively involved with their energy usage, so convincing them to opt in to clean and renewable energy, whilst they may not see the necessity, is a big challenge,” said Mr. Van Veller. “Likewise all new technological innovations face this challenge: becoming relevant to people’s lives.”

Small businesses and commercial energy consumers are more likely to tolerate some friction to reduce their relatively much higher energy bills. Some have talked of “grid defection,” firing their utilities and becoming energy self-sufficient. Sharing electricity makes that idea more viable.

SHARE ENERGY using whose wires? That’s a big question for would-be energy crowdsourcers in regulated jurisdictions. Mr. Owyang notes that sharing economies emerge when there is a surplus of something, and that Uber and Airbnb don’t own the assets they share. But to share energy requires the grid infrastructure, typically owned and used by the local utility. What motivates the asset owners to want to play the sharing game?

“Looking at other industries that are being disrupted now, those models could replicate in the energy space,” Mr. Owyang says. “When that does happen, it’s an opportunity for utilities to participate by creating their own marketplace and creating ways to buy, share and fund energy, and take a cut from those transactions.”

Many of the utility attendees talked with me during the three-day conference. These are the energy efficiency and conservation managers, not the folks who are in the hot seat when considering threats like crowd sourced electricity or grid defection.

The idea raises interesting questions around energy efficiency: Would the most energy efficient customers be the first to go off on their own? Would that be good or bad for the utility’s efficiency goals? The customers with the lowest remaining savings potential would take their load off the utility’s grid and out of the mandatory savings targets in states that have them. Subsidizing and marketing energy efficiency may be indirectly enabling customers to leave.

A larger question is about power reliability and cost, two arguments sure to arise as consumers organize platforms and bypass their utilities. Utilities have focused on those features, but without transitioning the product into a service (e.g., charging customers for uptime instead of kWh). Innovative sharing platforms can make that transition – I imagine, for example, HVAC as a peer-shared service.

Solar costs are falling, but renewable energy still is a big investment. As customer-generators start investing in capacity to meet the demand of a sharing economy, they’ll need some certainty about long-term prices. I recently stayed at an Airbnb, and capital recovery was not in the forefront of my hosts’ minds about sharing their guest room. Likewise, that nice couple was not too worried about being swept aside by shifting politics.

THE SHARING ECONOMY is here to stay, and Mr. Owyang makes a strong case for it. There’s little doubt that utilities are here to stay, in one form or another. The message here is that utilities need to be doing more than just worrying about their role in tomorrow’s collaborative marketplace.

“About three years ago the hotel industry thought their competitors were the other major chains,” Mr. Owyang says. “They never imagined that their next competitors would be the people they formerly called their customers. Airbnb turns customers into competitors, and hotels had no idea that could ever happen.”

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Published by Denis Du Bois

Denis Du Bois lives in the Seattle area. He specializes in helping tech companies to clearly communicate the value of their innovations. Denis and his family enjoy active weekends at their off-grid solar getaway in the Cascade Mountains.
View all posts by Denis Du Bois